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ACORN’s Bankruptcy: Not Debts, Cash Flow

New Orleans Having been out of the loop for over 2 years, I thought it was my duty to read through the various bankruptcy filings made by ACORN and six of its associated outfits, including the notorious Citizens Consulting, Inc. (CCI), which so enthralled the right in order to really understand the deeper “why” behind the bankruptcies. The conservative chorus and blogosphere had been less than edifying on this issue, so I wended my way through the PACER registration that allows lawyers and folks like me to access court filings, found my way to the eastern district of New York bankruptcy court in Brooklyn and for 8 cents per page for the first 30 pages, downloaded the whole package.

I was mainly struck by the pure and simple banality of bankruptcy. The page after page listings of $20 owed here to UPS and another 30 there to Verizon and the office supply store in New Orleans and the advance unpaid to Neighborhood House in Columbus and the rent left owing in Fresno. In the main this was all small potatoes.

The big ticket items were mostly debts incurred as the crises engulfed ACORN and

its new management and donors managed to gain the whip hand over the organization without any corresponding commitment to provide the carrots after administering the stick. There is some justice that many of the non-bailout bills were left unpaid to PR firms, an army of law firms including over $100,000 to Prokauser for the whitewash that no one read, image consultants, and others.

The biggest debt was the controversial $1M loan from Forest Ratner, the Atlantic Yards and Nets arena developer in Brooklyn that has been so contentious. ACORN had negotiated a community benefits agreement there for badly needed affordable housing, which unfortunately has not been built in the downturn. Opponents of the project are legion among the vast community who were not moved by the need for affordable housing in Brooklyn for a host of regions. In a shrewd move to consolidate support for her candidacy as the chief staff member of ACORN, Bertha Lewis in the fall of 2008 negotiated a combination deal with Ratner to prove her fundraising prowess involving about $400,000 in grants and $1M in loans, despite onerous repayment and penalty terms. With the voter registration crises swirling around ACORN, Bertha pulled the one string where she had leverage from her New York base — damn the torpedoes — realizing that Brooklyn was so polarized around Atlantic Yards and ACORN that it would hardly matter much more, and the likely criticism was secondary to her desperate need for bridge money while she waited for funders to grow a backbone. I love the fact the fact that in the end, she stiffed him, and I bet he’s still smiling in spite of himself. He’s a big time developer, so he knows what it means to go bankrupt and short folks when the pieces don’t come together, and a million plus was still a fair deal to have a friend in Brooklyn in the scale of things.

The other really big ticket items seem to be largely recalcitrant folks. I’m clueless what this $750,000 claim might have been from PA Charities Commission, but it must have cropped up over recent years and there must be some politics preventing settlements. ACORN clearly made a huge effort to try and resolve or transfer as many of the debts as they could in states where they were allowing the local organizations to rebrand, separately incorporate and go their own way. Or, they were so far gone in some states that they were no longer able to come up with a debt list which in the end amounts to about the same thing. Many of the liabilities of the allied corporations fall into the same category of contested grants where there are ongoing arguments. Many of these debts I would put in the category of time running out on the field without the opportunity of an overtime period: outstanding bills to long time auditors that all probably were manageable until money and time ran out, disputes with a New York or New Jersey workman’s comp bureau or unemployment office, and the like.

The debts in many ways almost seem modest. The advertised $4 million under close inspection is probably less than $1.5 million in “hard” debts, and most are small and unfortunate.

In reading all of the documents I came to these tentative conclusions:

It was all about the cash flow and not at all about the debts. It is inescapable to conclude that ACORN, as the organization has claimed repeatedly to anyone who would listen, was simply deserted by its funders and friends. The income from its members seems to have continued right to the end or until they were moved over to new state organizations. The debts were manageable or trivial.

I still cannot understand why management and leadership decided to file bankruptcy. The story is not in the debts or even the cash flow really. Clearly they just could not see a better future within the time frame they were willing to commit to the work. Who knows what’s right or wrong there? People had clearly had enough, and that’s what moved the decision. I can remember being in a similar situation in 1970 with Massachusetts Welfare Rights where I almost threw the towel in while watching a huge leadership dispute there. It’s a dark place where you move to any light you can find.

I wrote a memo in the 70’s about cash flow management called “float, stretch, burn.” Liz Wolff at CCI and Bertha seem to have done a good job of managing the end game once they pulled the plug. Selling our New Orleans buildings, even at the bottom of the market, gave them some money and leverage to play with that helped no doubt make this all come together more smoothly than it might have been, but it’s sad to read rather than pathetic.

The post-mortem for ACORN will take years to determine, and there will be a lot of people perhaps more able than me, trying to get their arms around it, but it’s clear from the bankruptcy filings that simple answers and talking points are still not going to be any more sufficient to explain the end of ACORN than they were useful in building the organization.